US marketers extend payment terms

04 December 2013

NEW YORK: About four-in-ten US marketers have extended payment terms for at least some marketing services this year, according to a new report from the US industry's trade body.

The Association of National Advertisers (ANA) found 43% of the 98 marketers it questioned had lengthened payment terms for marketing suppliers from May 2012 to the end of April 2013, and this included agency fees, research, production and other services.

This looks set to continue into 2014 as 42% of respondents said they were "somewhat or very likely" to change payment terms next year.

However, 17% reported that they had shortened terms on at least one marketing service while 90% said they made no changes to their payment terms for at least some services.

The ANA warned marketers that they risked straining relationships with suppliers even if the prime reason for extending terms of payment was to improve corporate cash flow.

ANA CEO Bob Liodice said: "It is becoming very clear that payment terms are becoming increasingly important to the overall marketer/supplier relationship. Such considerations must now be integrated into the total compensation equation."

"While the ANA does not recommend any specific term or practice, we do advocate better collaboration that advances the quality of the marketer/supplier relationship and the products and services delivered," he added.

Survey respondents pointed to finance and procurement departments as being the ones most responsible for driving the changes.

As reported by Advertising Age, marketers with procurement departments were almost twice as likely to have extended payment terms as those without (54% versus 28%) while 38% of respondents with procurement departments said they are very likely to change payment terms next year.

As the issue of extended payments has received recent media coverage – especially concerning major FMCG buyers, such as Procter & Gamble and J&J – the ANA expected its research to provide more detail about whether term extensions formed part of a wider industry trend.